Republic of Iraq public expenditure review

Provides an integrated perspective on Iraq’s need to provide better public service delivery, while maintaining macroeconomic stability and fiscal discipline. The achievement of these objectives unfolds within a challenging context of revenue volatility, the need to diversify the economy, weak accountability mechanisms, and residual conflict.

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Republic of Iraq Public Expenditure Review: Toward More Effi cient Spending for Better Service Delivery provides an integrated perspective on how Iraq needs to provide better public service delivery while maintaining macroeconomic stability and fiscal discipline. These goals exist amid a challenging context of revenue volatility, the need to diversify the economy, weak accountability mechanisms, and residual conflict. Reflecting these challenges, key socioeconomic developmental indicators are stalled or are even declining despite rapid growth in public spending. Growth in spending has not been matched by absorptive capacity, let alone improved outcomes. The difficult task of encouraging fiscal institutions to embed practices of good economic management remains a work in progress. The task for Iraqi authorities will be to turn oil revenues into sustained welfare improvements. Macroeconomic stability alone is not enough to address social and economic development issues and to avoid a 'resource curse'. Economic diversifi cation is imperative for the goals of creating jobs and promoting income-generating opportunities for the Iraqi population. In the years ahead, Iraqi government authorities will have the following key challenges: (i) to remove constraints to nonhydrocarbon economic activities; (ii) to ensure the effi cient use of oil revenue, and (iii) to restrain the growth of current spending to free up resources for public investment, while maintaining essential safety nets and social support for the poor and disadvantaged. Senior policymakers at the Ministry of Finance, Ministry of Planning, and line ministries have the opportunity to take concrete steps now. As economic growth prospects are favorable in the medium term, the Iraqi government needs to lay the foundations of a broadly diversifi ed economy and to provide decent public services and security while facilitating adequate economic freedom.